Shobi Dahl, CEO of Dave’s Killer Bread / NatureBake was profiled by Portland Business Journal in early 2012. Here’s what he said his Best Business Decision was:

Working with a family business counselor when things got rough between my dad, uncle and I a few years ago. His name was Eugene Wallace and he basically saved us from killing each other.

Read Shobi’s full Executive Profile.

Securing the Life and Legacy of Your Family Business

Failure to develop an adequate plan for the disposition of a business interest at the death or disability of its owner could kill your business legacy.  It may result in a forced sale of the interest whether it is a proprietorship, partnership, or a substantial stock ownership in a closely held corporation. A buy-sell agreement is often the only way to arrange for the disposition of the owner’s interest in a fair and equitable manner.

Buy-sell agreements are directed toward the continuance of the business interest after the death of one or more of the owners. The existence of a buy-sell arrangement is designed to eliminate the problems that may arise if the surviving owners are forced to become business associates of the decedent’s family. Not only may there be goal and personality conflicts, but inexperience and differing financial needs are potential business killers which could ultimately result in the financial death of a once-profitable enterprise.

A business without a buy-sell agreement is comparable to a person without a will. In each case, important decisions will need to be made. Allowing the property to pass according to a plan specified in the state law of intestacy, rather than according to the wishes of the decedent, might result in outcomes that are unintended by the individual and/or business owner. They might not be appropriate and, in the case of the business, could result in its sale to non-family members leaving remaining family and/or partners without income and often in debt.

Estate liquidity will be a paramount concern for survivors. Every business owner will want to assure the family of a fair and reasonable price for the business—not a liquidation price that may result from a forced sale. Finally, few people want their family’s future totally dependent upon the fortunes of a business venture which they no longer manage. A properly drafted business buy-sell agreement should accomplish the following:

• Pre-determine the business’s value for federal estate tax purposes
• Assure that any future growth in value accrues to benefit those responsible for the gain
• Provide sufficient cash to surviving business associates with which to purchase the decedent’s interest
• Assure a fair and adequate sales price
• Separate the family’s financial position from that of the business
• Transform illiquid assets into a liquid income-producing fund

Keeping your business alive while you’re running it is hard work.  Keeping it alive after you pass it on is even harder work.  A buy-sell agreement is a powerful tool to consider as you plan for the ongoing life of your business.

[Note: This article is not to be used as tax or legal advice. Always consult with local counsel or a tax specialist on all specific tax and legal matters.]

When it comes to ensuring that your business succeeds now and through the next generation the old adage, ‘when you fail to plan, you plan to fail’, comes to mind.  Taking the time to pick the right grape vines, choose the right soil, cultivate it correctly, care for and support the initial stages of growth and then prune appropriately leads to successful harvest and wine in the future.  If planned and implemented well, the vintage can get better and better.  Taking the time to plan for the success and succession of your business is critical to giving your business an increased opportunity to thrive into and through the next generation.

Recently, in speaking with a father, who founded a very successful business, he mentioned that his planning was all done.  When I asked him what he meant, he indicated that his wills and trusts were in good order and he was now relying on the kids to take over the business and run it the way that he had done so successfully for the past thirty years.  I was impressed and went on to ask how the plan to make sure that the kids and the key employees were ready to run the business was laid out?  He hesitated a bit and told me about the recent awards his business had won and how successful he has been and that he expected his kids to do the same.

We had gotten together because he wanted to make sure that he was done with his planning.  I learned that he had the transition transactions in place – wills, trusts, etc. – and I discovered that he had been very successful.  Yet, I was asking about two things in addition to that:  first, what were the plans to make sure the people, to whom he was passing on leadership of the business were ready; and, secondly, what were the plans to make sure the business would make it through the generation to which he was passing on the business and make it successfully to the next generation of leaders?

Succession planning includes celebrating success and getting documents in order to guide the transition process at your death.  However, it also includes the planning, people and provision for continued success and longevity.

The planning includes strategically thinking about how best to grow and position the business for ongoing success.  Take the time to assess where you are — the good, bad and ugly –, determine where you want to go and then create the goals and action steps to get there.  This does not have to be a long drawn out process.  It does need to be clear and relevant.  This planning is increasingly important as a business is preparing to change leadership.  How clearly laid out is your planning process and ongoing plan?

The people taking on leadership need a path forward and the knowledge, skills and abilities to successfully take the baton from the outgoing leadership.  Taking the time to assess the strengths and weaknesses of potential new leaders and then creating a successor development plan for them, is powerful.  Businesses that put the effort into developing people experience a process of continued growth as they grow new leaders prior to the time when they take on the full mantle of responsibility.  Succession planning is about the people most of all.  Estate planning documents are necessary, yet the ‘will’ that is more important is at the heart of those taking on leadership.  Are they ready, able and willing to do what it takes to keep the business on track?

The provision of exit strategies, business structures and funding that effectively prepare the business to move successfully through the next generation can make or break the legacy.  Over time businesses typically grow in size and value.  This growth presents challenges and opportunities.  Take the time to carefully plan for what that growth will look like so that the next generation can exit the business to make room for successors.  This means making sure the exit strategies do not drain the business or leave it weakened in some way.  Paying attention to business structures to minimize transition difficulties and tax liabilities can make or break a business.  Desire to pass a business on to the next generation is one thing, providing the funding and economic viability is another.  How will the successor generations be able to take on the business without compromising the lifestyle of the outgoing business leaders?

Failing to plan is the forerunner of planning to fail.  As you consider the success and succession of your business, take the time to fill the holes in your plan.  The planning, people, and provision for success are critical elements in every succession plan.  Taking the time to cultivate success will go a long way to grow your business now and through the next generation.